What Should Gold Investors Expect From Jackson Hole 2017?

The 2017 Economic Symposium in Jackson Hole, Wyoming, is set to start on Friday. How can it affect the gold market?

This week is rather light in terms of incoming economic data. Instead, investors await the annual Jackson Hole Economic Policy Symposium scheduled this Friday in Wyoming. The conference is one of the most famous and important gatherings of central bankers, policy experts, academics, and leading financial market players, so it is closely followed by investors. Historically, the meeting provided investors with unexpected and important remarks that were able tosignificantly affect financial markets. The best example may be the 2010 symposium when Ben Bernanke announced the second round of quantitative easing, which supported gold prices. On the contrary, last year Janet Yellen delivered a hawkish speech in which she noted: “the case for an increase in the federal funds rate has strengthened in recent months.” In consequence, gold prices declined.

But what should we expect this time? The topic of the upcoming conference is “Fostering a Dynamic Global Economy”, so the participants could discuss how to speed up the sluggish productivity growth and relatively slow recovery. However, investors will be watching specifically for remarks from the world’s two most important central bankers: Janet Yellen and Mario Draghi. Investors will be looking for any clues on whether the former will or will not step back from the plan of a gradual tightening in the face of subdued inflation. And the markets will be also waiting for any hints about the expected tightening of the ECB’s monetary policy. In 2014, Draghi announced a full-blown program of asset purchases – and now investors await the signals of the end of the era of ultra easy money in the Eurozone. However, recent media reports suggested that Draghi will refrain from any major announcements.

The euro retreated yesterday against the U.S. dollar amid expectations of a cautious message from Draghi, as traders scaled back their too hawkish projections of the pace of the ECB’s tightening. Indeed, we believe that the Fed may turn out to be more hawkish than expected at the Jackson Hole Conference, while the ECB more dovish than forecasted. The euro has appreciated more than 11 percent so far this year. Hence, investors could take advantage of the symposium and take some profits. Such a scenario would be bearish for the gold market. Anyway, the yellow metal may be volatile in the upcoming days – and any kind of surprising remarks from the ECB or the Fed could ignite an important move in gold prices. Stay tuned!